Bank Audit – GST Perspective


Bank Audit – GST Perspective

In this article, what one should be checked while doing bank audit?  I have

tried to compile all the information under one roof which are relevant for bank audit and will be helpful while doing bank audit.

Checking of Outward Supply and its taxation:

Following are the services of the banks which are liable for GST

Sr No. Name of Services
1. Financial and related services; real estate services; and rental and leasing services.
2. Service provided by Banks to RBI
3. Services in the nature of

–      Processing Fees

–      Documentation Charges

–      Ledger Folio Charges

–      DD Charges

–      Issuance of Bank Statement Charges

–      Stop Payment Charges

–      Standing Instruction Charges

–      Inspection Charges

–      Bank Guarantee Commission Charges

–      Issuance Charges of Letter of Credit

–      Bills discounting charges

–      CIBIL Charges

–      Renewal Charges

–      Cheque Bouncing Charges

–      Penal Interest (as per Rule 15(2))

4. Services by way of

–      Loan Take over Transaction Charges/Securitization Charges

–      Sale of Repossessed Assets

–      Sale of scrap sales

–      Interchange fees on card settlement fees paid/shared by banks

–      Interest on Financial Lease


Following are the services which are exempt from GST

Sr No. Name of Services
1. Services by the Reserve Bank of India
2. Services by way of—

(a)     Extending Deposits, Loans or Advances in so far as the Consideration is represented by way of Interest or Discount (other than interest involved in credit card services);

(b)   Inter se Sale or Purchase of Foreign Currency Amongst Banks or Authorised Dealers of Foreign Exchange or Amongst Banks and such


3. Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana
4. Services by an acquiring bank, to any person in relation to settlement of an amount up to two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other

payment card service.

5. Services by the following persons in respective capacities – (a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch
6. Service by way of Invoice/Cheque or other similar discounting
7. Services in the nature of

–      Collateralised  Borrowing   and   Lending   Obligations                       (CBLO) Transactions

–      Securitisation Transactions undertaken by Bank

–      Repos and Reverse Repos transactions

–      Income From Commercial Paper or Certificate of Deposit

–      Promissory Notes

–      Interest on debt instruments


Following are the Services which banks are liable to pay GST under Reverse Charge Mechanism:

Sr No. Name of Services
1. Services supplied by a recovery agent to a banking company or a financial institution or a nonbanking financial company
2. Services provided  by business  facilitator (BF)     to    a                banking company
3. Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory
4. Services    provided    by    way    of  sponsorship to anybody corporate or partnership firm
5. Supply of Services by a goods transport agency (GTA) in respect of transportation of goods
6. Security services (services provided by way of supply of security personnel) provided to a registered person
7. Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs).


Checking of Inward Supply and its taxation (ITC):

  1. Compliance of ITC Reversal:

According to section 17 (4) :

A banking company or a financial institution including a non-banking financial

company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-section (2), or

avail of, every month, an amount equal to fifty per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:

Provided that the option once exercised shall not be withdrawn during the remaining

part of the financial year

Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number. 

  1. Compliance to section 17 (5):

While checking expenses one should ensure that Blocked credit should not be availed by the branch i.e. credit on Insurance, Motors vehicle and conveyance, Food beverages etc.


Checking of other compliances with GST:

According to Rule 18 of CGST Rules, 2017 Display of Registration Certificate and GSTIN on the Name Board of branch at entrance of Branch is mandatory failure to compliance attract penalty of Rs. 25,000/- for CGST & SGST respectively.